Karachi, November 11, 2024 – Pakistan’s fiscal challenges intensified as total debt and liabilities surged to Rs 85.84 trillion by the end of the first quarter of FY2024-25, the State Bank of Pakistan (SBP) reported Monday.
This marks a substantial 9.46% year-on-year increase from Rs 78.42 trillion in Q1 of FY2023-24, underscoring Pakistan’s growing financial strain amidst inflationary pressures, a depreciating currency, and economic instability.
The breakdown reveals a steep 10.17% rise in total debt, amounting to Rs 83.01 trillion in Q1 FY25, up from Rs 75.35 trillion during the same period last year. The debt increase was largely fueled by a spike in domestic borrowing, while external debt showed a slight decline.
Domestic debt, a critical component of Pakistan’s overall obligations, soared to Rs 47.54 trillion by the close of September 2024, up from Rs 39.7 trillion a year prior. This substantial rise in domestic borrowing reflects the government’s increasing reliance on internal sources to manage fiscal gaps, further heightening pressure on the banking system and curtailing liquidity in private sector financing.
In contrast, Pakistan’s external debt edged slightly down to Rs 33.72 trillion from Rs 33.95 trillion in the previous year, primarily due to reduced foreign funding. However, the country’s debt obligations to the International Monetary Fund (IMF) saw a notable uptick, reaching Rs 2.57 trillion, up from Rs 2.26 trillion in Q1 FY24. This increase indicates Pakistan’s continued dependence on multilateral support to stabilize its financial position, even as external financing options grow increasingly constrained.
On the liabilities front, the country’s total obligations saw a slight decrease, falling to Rs 4.48 trillion from Rs 4.7 trillion in Q1 FY24. Within this, external liabilities decreased marginally to Rs 3.35 trillion, down from Rs 3.39 trillion, while domestic liabilities rose to Rs 1.14 trillion from Rs 1.31 trillion.
Debt servicing costs remained elevated, totaling Rs 2.12 trillion, with external principal repayments increasing to Rs 578 billion from Rs 514 billion. Interest payments on debt, however, experienced a slight respite, falling to Rs 1.48 trillion from Rs 1.56 trillion, largely due to marginally lower rates on specific external obligations.
The ballooning debt underscores Pakistan’s urgent need for structural reforms to contain fiscal imbalances and implement sustainable economic policies. Without significant adjustments, the mounting debt burden poses a risk of limiting Pakistan’s fiscal flexibility and further weakening the country’s economic foundation.
